WHEN YOU CONTRIBUTE TO CHARITY, EVERYONE BENEFITS

This "Financial Focus" column is prepared by Edward Jones Investments, headquartered in St. Louis. Jones includes branches throughout the nation, including Cape Girardeau and Jackson.

If, like many people, you provide financial support to at least one civic, religious or educational institution, you may have often wished that you could give more, if you could afford it.

But if you look beyond strictly cash donations, you can make larger gifts -- and both you and your institution of choice will benefit.

Donate appreciated stock

If you've been investing over the course of the long bull market, then you may own several stocks that have appreciated significantly in value. Why not consider giving some shares to the organization you want to support? By doing so, you'll gain a couple of key advantages.

To begin with, you will be able to deduct all or part of the gift from your taxes. Furthermore, when you contribute appreciated stock that you've held for at least a year, you won't be liable for any of the capital gains taxes due when the stock is sold. Even with the new, lower capital gains rate of 20 percent, these taxes can be considerable.

By donating appreciated assets to a charitable organization, you can also help your estate planning -- if you make your donation through a charitable remainder trust.

Here's how it works:

You contribute appreciated assets -- stocks, real estate, etc. -- to the charitable remainder trust. The trust sells the assets and uses the proceeds to purchase a portfolio of securities. The trust then pays you an income stream for life, and the organization receives the principal upon your death.

By setting up such a trust, you'll avoid a capital gains hit and you'll be able to take a deduction on your current-year taxes. Furthermore, because you'll be moving assets out of your estate, your beneficiaries will have fewer estate taxes to pay.

You may have noticed one element that's missing from this picture: your children. How can you provide for them if you transfer the bulk of your appreciated assets to a charitable remainder trust?

One possible solution is to use the income you receive from the charitable remainder trust to purchase a life insurance policy on yourself.~ However, if you own the insurance, the proceeds will go into your taxable estate. As an alternative, you might want to consider purchasing an insurance policy in an irrevocable life insurance trust. Because the trust actually owns the insurance policy, the proceeds will be kept out of your taxable estate, which means your heirs will pay less in estate taxes, and you can direct the trust to provide your heirs with regular income.

Trusts can be complex instruments. Before establishing one, consult with your legal adviser.

Everyone benefits . . .

Deciding how to make a charitable gift -- through a straight donation of appreciated stock or through a charitable remainder trust -- will depend, in large part, upon your financial objectives. If a tax deduction is your primary objective, making a straight donation may be the most appropriate route for you. A charitable remainder trust, on the other hand, might be appropriate for someone seeking an income stream, under certain circumstances.

Regardless of how you choose to make a charitable gift, you'll be helping a valued institution and yourself. In short, everyone benefits.

The Southeast Missourian does not recommend that readers buy or sell stocks featured in this column, which is provided for informational purposes only.